American Oil and Gas Reporter - December 2015 - 109

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BakerHostetler attorney Mark Barron
indicated that Onshore Orders 3, 4 and 5,
as well as BLM's looming rule regarding
venting and flaring, and another advance
notice of proposed rule making about royalties, were intertwined. "It is very difficult to comment on any one of them individually without the full scope of what they
are proposing in all five," he expressed.
"Fundamentally, this really is comprehensive royalty reform being done in a segmented way."
Dillé recounted a meeting he and other industry representatives had with officials from BLM and the Office of Management and Budget to discuss the impending venting and flaring rule. "It was
obvious they really were going after
North Dakota flaring," he described.
He said some BLM officials expressed
a desire for a seamless, vent-free system
on every location. "It was kind of revelatory to them that shutting an oil well in
means it may not come back with the same
production, and they did not understand
how mechanical and finicky wells were,"
Dillé recounted. "After we told them what
shutting in a well can do to it, they wanted to know what percentage of shut-in
wells never came back, what percentage
came back at lower production, and at what
percent. They want a lot of quantification."
Naatz, who also attended that meeting,
concurred. "They seemed to almost think
it was a matter of flipping a switch," he
compared.
Dillé added that federal officials also
did not grasp the implications for drilling
units that mingled federal and nonfederal minerals. "Shutting in those wells will
impact everybody within that drilling
unit," he related.
And although some have characterized
these proposed venting and flaring changes
as part of an impending Onshore Order No.
9, Barron indicated BLM was not using
that terminology and was going to jettison
it with regard to Orders 3-5. "They are being revised to come under the Code of Federal Regulations (CFR)," he explained.
"That makes no difference 99 percent of
the time, but as we are seeing in the hydraulic fracturing lawsuit, when the CFR
conflicts with onshore orders, the CFR
controls. These will be official CFR regulations. The concept of onshore orders is
going away."
RCRA Threat
Part of Fuller's remarks during the industry issues panel discussion considered
some risks the industry might face from
the Resource Conservation and Recovery
Act. He noted that oil and gas opponents
had petitioned the Environmental Protec-

tion Agency to reconsider its 1988 regulatory determination that oil and gas
wastes did not belong under the statute's
Subtitle C regulations for hazardous
wastes.
"It is unlikely EPA actually will pursue Subtitle C as a pathway for regulation
because any regulations eventually would
have to go through Congress and be authorized in law," Fuller related. "Consequently, we are seeing a movement by environmentalists to look at Subtitle D,
which is solid waste, including municipal
and industrial wastes."
Fuller reported that EPA had received
a notice of intent to sue because the
agency had failed to update its guidance
to states and failed to undertake proposed efforts in the 1988 regulatory determination to alter Subtitle D management
of production wastes. "It is an area in
which EPA has some exposure because the
guidance is supposed to be reviewed
every three years . . . but it may not have
occurred since 1981," he described. "So
we think this may be another pathway for
the type of sue-and-settle deals we see a
lot from environmentalists, in which they
find a mandatory duty, take the agency to
court, and get it on a schedule to force it
to take action."
Fuller indicated that even if EPA did
create Subtitle D regulations, RCRA limits the agency's authority to force the states
to implement them. "But, if the state
does not adopt the federal regulation,
RCRA also creates a citizen suit pathway,
where producers could be exposed to
possible lawsuits for failing to meet the
federal requirements, even though they
might be complying with the state regulation," he reasoned.
Crude Oil Exports
During his remarks on efforts to loosen
or end restrictions on U.S. crude oil exports, a subject which also received considerable attention during the meeting of
the Liaison Committee of Cooperating Oil
& Gas Associations (see story page 105),
Naatz emphasized IPAA's efforts to be
nimble on the issue. "We are very confident in our ability to work the Hill, build
coalitions and get things done, which is
what we will do on crude oil exports," he
vowed.
Naatz reflected on how far export advocates had come during the past year. A
year ago, he indicated, even the industry's
strongest congressional allies expressed
concerns that U.S. oil exports could raise
their constituents' gasoline prices. "That
is gone," he reported. "All the studies and
bipartisan reports really have shown that
simply is not true."

Going forward, he added, industry
advocates will be wise to cite the nuclear
accord between Iran and the five permanent members of the U.N. Security Council plus Germany. "It really moves the needle when you say Iran is allowed to export
its oil, but the United States cannot," Naatz
related. "The (public opinion) numbers
start to go off the charts, so we will use that
message."
❒

IEA . . . . . . . . . . . . . .
FROM PAGE 73

energy savings posted under the central
scenario, foregoing $800 billion worth of
efficiency improvements in cars and
trucks, aircraft, and other end-use equipment.

Natural Gas
The Outlook views natural gas as a
good fit for a gradually decarbonizing energy system, whether it replaces more carbon-intensive fuels or backs up renewables.
IEA says a consumption increase of almost
50 percent makes natural gas the fastestgrowing of the fossil fuels.
China and the Middle East are the main
centers of gas-demand growth, the agency
indicates. Both will be larger consumers
than the European Union, which the IEA
says it does not see returning to its gas usage peak reached in 2010. With natural gas
prices already low in North America and
pulled even lower elsewhere by ample supply and contractual linkages, the Outlook
notes there is plenty of competitively
priced gas seeking buyers in the early part
of its projection period.
The IEA warns that gas growth could
be limited if deferred investments in today's low-price environment bring tighter
markets in the 2020s. It says a fifth of the
projected growth in global demand relies
on gas transported long distances through
very capital-intensive pipeline or liquefied
natural gas projects. Keeping those project costs under control will be vital to the
future competitive positioning of natural
gas, it states.
Unconventional gas accounts for 60
percent of the increase in global gas supply, but the spread of its development beyond North America will be more gradual
and uneven, IEA predicts. The pace of China's unconventional industry is a major uncertainty, the agency contends. While
policies encouraging development are in
place, with production projected to exceed
250 billion cubic meters by 2040, the Outlook says geology, limited water availability, and population density in some key resource-rich areas mitigate against a very
rapid rise in unconventional gas output. ❒
DECEMBER 2015 109

American Oil and Gas Reporter - December 2015

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